The financing was led by a new investor, New York-based Quogue Capital. The rest of the money came from Calistoga’s existing investors—Alta Partners, Amgen Ventures, Frazier Healthcare Ventures, and Three Arch Partners—as well as one additional new investor, Latterell Venture Partners. Calistoga, founded in 2006, has now raised three venture rounds since its inception worth a combined $91 million.

Calistoga has been building momentum for the past couple years as one of the players emerging in one of the promising niches of cancer research. The company specializes in making drugs that block what’s called the PI3 kinase pathway, which researchers say plays a vital role in controlling critical cell processes like proliferation, migration, and cell survival. When these normal functions get flipped into an overactive mode, it’s a hallmark of cancer cells run amok, or an immune system gone wild so that it attacks healthy tissue.

The company arrived on the national scene at the American Society of Clinical Oncology a year ago, when it showed some surprisingly strong clinical trial results from the first dozen patients in a clinical trial. Since then, Calistoga has been able to confirm its lead drug candidate has strong anti-tumor activity in three different malignancies—slow-growing non-Hodgkin’s lymphoma, mantle cell lymphoma, and chronic lymphocytic leukemia—based on a bigger database of more than 100 patients in a clinical trial. The new round of cash will be used to push Calistoga’s lead compound, CAL-101, through the final stage of clinical trials, and to run tests that prove a related drug can be effective against inflammatory diseases.

Carol Gallagher

“We cure a lot of mice in biotech, and not many patients,” Gallagher says. “We’re really enthusiastic about our opportunity to continue to build value, and hopefully extend patients’ lives.”

The company is certainly not the only one with visions of creating potent new cancer drugs against the PI3K target. GlaxoSmithKline, Novartis, Roche, Exelixis, Oncothyreon, and Intellikine are a few of the other contenders. The key difference, Calistoga says, is that the others make drugs that hit a broad cross-section of PI3K enzymes, while Calistoga zeroes in on a specific subtype of the target, known as the delta isoform that’s found on cells implicated in blood cancers and inflammatory diseases.

Armed with the new $40 million in capital, and the clinical trial data from more than 100 patients, Calistoga is now aggressively planning its next steps. The plan is to have a meeting with the FDA to talk about the design for a pivotal clinical trial program that could build strong enough evidence for CAL-101 to earn FDA approval, Gallagher says. If all goes well, the company will agree with regulators on the number of patients required, and the proper goals of the study, so that the trial can begin in the fourth quarter of 2010, Gallagher says.

Such a trial will be expensive, and Calistoga is still picking up 100 percent of the development costs on its own. The company should have enough money … Next Page »